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Two other studies that shed light on plan choice in Medicare used data on retirees in

employer-sponsored health benefits programs. Buchmueller (2000) examined how University of

California retirees responded to changes in out-of-pocket premiums caused by a change in the

University’s premium contribution. He estimated price elasticities in the range of –0.12 to –0.24,

depending on the type of plan the retirees was in at the time of the change. In a similar study,

using retiree data between 1997 and 2002 from an employer with roughly 2,700 employees

located in the Southwestern United States, Buchmueller (2005) estimated elasticities ranging

from –0.14 to –0.37, slightly higher than his previous estimates. He attributed the difference to

the latter study’s higher level of variation in price, which depends (exogenously) on when the

individual retired and his or her years of service as of that date. In addition, Buchmueller (2005)

noted that the premiums observed in his study were higher than in the data used by Atherly et al.

(2004), largely explaining the difference between their elasticity estimates.

2.

Medicaid and SCHIP

Although Medicaid prohibits premiums for the categorically eligible population, some states

charge monthly premiums to low-income beneficiaries in their Medicaid expansion programs

(for noncategorical individuals) and in SCHIP. Evidence from a limited number of studies

indicates that premiums reduce Medicaid participation and make it harder for individuals to

maintain

stable

and

continuous

enrollment.

These

studies

seem

to

indicate

that

price

responsiveness among either Medicaid or SCHIP beneficiaries is much higher than among

individuals in the private market.

Ku and Coughlin (1999/2000) examined participation rates among people eligible for

Medicaid

expansion

programs

and

who

faced

premiums

of

differing

levels.

They

found

premiums set as low as 1 percent of a family’s income lead to an approximately 15 percent

reduction in public program participation. Shenkman and Vogel (2005) examined disenrollment

29

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